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TRADE POLICY OF PAKISTAN

TRADE POLICY OF PAKISTAN

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Published by Jawad Hussain
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TRADE POLICY OF PAKISTAN PAKISTAN’S STATEMENT ON THEMATIC ISSUES 25.01.2002
Mr. Chairman, Let me begin by thanking you for helping us fix the parameters of our response to the very pertinent and, if I may say so, thought provoking comments and questions of the distinguished delegates. The themes proposed by you are comprehensive and facilitate an orderly response. I shall try to conform to the coverage as well as the order suggested by you. Fiscal Regime 2. We have already highlighted the rev
1

TRADE POLICY OF PAKISTAN PAKISTAN’S STATEMENT ON THEMATIC ISSUES 25.01.2002
Mr. Chairman, Let me begin by thanking you for helping us fix the parameters of our response to the very pertinent and, if I may say so, thought provoking comments and questions of the distinguished delegates. The themes proposed by you are comprehensive and facilitate an orderly response. I shall try to conform to the coverage as well as the order suggested by you. Fiscal Regime 2. We have already highlighted the rev

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TRADE POLICY OF PAKISTAN PAKISTAN’S STATEMENT ON THEMATIC ISSUES 25.01.2002
Mr. Chairman, Let me begin by thanking you for helping us fix the parameters of our response to the very pertinent and, if I may say so, thought provoking comments and questions of the distinguished delegates. The themes proposed by you are comprehensive and facilitate an orderly response. I shall try to conform to the coverage as well as the order suggested by you. Fiscal Regime 2. We have already highlighted the revenue imperatives of

Pakistan. We are acutely conscious of the narrow tax base as also the temptation of ease of collection rather than a more fair and equitable taxation system. We are trying to correct it. The specific measures being taken by us are : • Wider application of the general sales tax (GST). Its share in tax collection has gone up from 18% in Fiscal Year 1991 to 38% in Fiscal Year 2001. Our reliance on this form of taxation is expected to grow in the coming years as we shift to a genuine value added taxation (VAT) system.

• A large scale revamp of the physical and social infrastructure through comprehensive human development measures and greater private sector role. • A focused programme for the development of small and medium enterprises. The main constituents of our strategy for greater export diversification and enhanced competitiveness are : • Going up the value chain through proper supply-chain management and on-shore capacity development of the exporting enterprises. and checks evasion and avoidance.2 • Continuous reduction in the rates of custom duties. With the introduction of this new tax law. does away with exemptions. coupled with a fast track elimination of the exemptions regime. • The Income Tax Ordinance 2001 provides for a greater transparency and predictability. . All this ought to contribute to greater revenue collection. Export Diversification 3. and a stronger shift away from taxes on trade. we hope to be able to reduce the existing high tax rates. and the multiplicity of taxes.

the Paris Club rescheduled/reprofiled the $ 12. Two-thirds of the Paris Club debt was concessional in nature (ODA). With this debt rescheduling the Net Present Value of our external debt is expected to decline by about 30 percent. Pakistan’s total outstanding external debt as of September 2001 was $ 38 billion.0 billion external debt. which was rescheduled for 38 years including 15 years grace period. Regarding terms of trade. market based polices.3 4. quite frankly. Paris Club debt rescheduling has provided substantial fiscal expenditure and on on social sectors. The non-ODA debt was scheduled for 23 years. believe . we see little chances of their improving in the present global economic scenario. poverty We alleviation that space and the Government will be utilizing this space to enhance physical infrastructure. In December 2001. of which $ 12.0 billion was owed to Paris Club creditors. will yield It is our expectation results for that our a sound macro-economic and framework. The recently concluded Paris Club deliberations are expected to provide the desperately needed relief on debt servicing. Government programmes. and curtailment of the role of the state positive export diversification competitiveness. Debt Rescheduling 6. including 5 years grace period. 5. 8. 7.

Tariff reduction. though it is not sure if we did it out of commitment or compulsion. insurance etc. capital and management. Our economic revival programme will help trade enhancement by putting it on a more competitive basis. or subsidised credit. Price controls have been virtually done away with – even in sensitive areas like motor gasoline etc. This is evident in divesture. withdrawal of subsidies. it is the Oil Marketing Companies that fix the prices and not the Government. we are setting up regulatory authorities in sectors such as petroleum and gas. We also continue to encourage the private sector in provision of physical infrastructure. closure or privatisation efforts in the services and manufacturing sectors. In agriculture. whether it is the irrigation system. In the recent past we have made valiant efforts to drastically curtail the role of the state in economic activity. given the private sector deficit in entrepreneurial skills. Like several other friends we too have found the temptation to dabble in one strain or another of socialism hard to resist. stable exchange rate. our recently introduced reforms are aimed at minimising the role of the State. too. or procurement and storage of grains. or fixation of support prices. 10. Concurrently. and the consequent correction of anti-export bias. power generation. and an effective elimination of rent . Role of State in Economic Activity 9. We are trying to dismantle the last remaining bastion of state monopoly in the Railways sector.4 improvement in physical infrastructure and human capital will go a long way in raising the country’s economic growth on a sustainable basis.

I have had the opportunity to reiterate Pakistan’s unequivocal commitment to the multilateral trading system. While there has been considerable progress. sheer enormity and complexity of the task. Multilateral Trading System 13. and want of sufficient expertise combined to slow down the privatisation process. I have to admit our privatisation programme has fallen short of our expectations. We have tried to honour our WTO commitments in letter and spirit. We also hope that the macroeconomic and structural reforms will induce greater foreign direct investment. The important thing is that we are pursuing it with a renewed vigour. these have been due to capacity weaknesses . 12. Narrow domestic capital and entrepreneurial base coupled with external factors such as sanctions etc. It is without doubt one of the important pillars of our economic revival programme. we have high hopes of strong investor confidence in Pakistan. We have a favourable investment regime – indeed the Secretariat report describes it as one of the most open in the region. and if at all there have been lapses. particularly in export-oriented enterprises. Investment & Privatisation 11. With stability ensuing from reforms.5 seeking opportunities ought to put the fundamentals of our trade endeavours on a more firm and sustainable footing.

and in our written answers to the questions. we have tried to demonstrate how closely we have followed the spirit of the WTO. 15. The Secretariat report recognises this at several places. We are glad the capacity issue figured prominently at the Doha Ministerial and we look forward to working closely with the Secretariat in the matter of capacity building and technical assistance. Simultaneously. WTO Cell in the Ministry of Commerce. In our statements. Our concerns at any measures to undermine the multilateral system have been repeatedly articulated. .6 rather than any intent to by-pass the WTO process. collateral organizations in the Universities and the Chambers – we are more than conscious of our capacity limits. Pakistan has been pursuing trade facilitation in earnest. Trade Facilitation 16. Pakistan is currently working on a World Bank funded trade facilitation project for which UNCTAD is the consultant. 14. WTO focal points in each Ministry . The new Import Policy and Procedure Order is a step in this direction. customs and port procedures. Despite the measures we have taken – WTO Council. particularly where we have complied ahead of schedule. Documentation requirements are being minimised. there has been an extensive demystifying and debugging of the banking.

on about 80 of these items. have brought out the anomaly in respect of 91 items (8 digit HS code) where our applied rates exceed the bound rates. We would like to clarify that the duty concessions agreed to with the European Union are applicable on an MFN basis and our tariff bindings have already been notified to the WTO. we continue to adhere to the systems as embodied in the Agreement on Customs Valuation. we will see if we can do away with this requirement. 18. In the meanwhile. As soon as I get back home. on most of these items our applied rates will reach the bound rates three . At least part of the explanation is in our determination to control tariff dispersion and the annually diminishing bound rates did not coincide with our four slabs.7 17. Although it is a routine measure where registration is almost automatic. that will become effective 1st July 2002. 19. Pakistan. In any event we have already notified to WTO our rates. In other words. adheres to the MFN principle with such exceptions as GATT permits. Tariffs 20. we would like to respond to Members’ concerns in a positive manner. On Customs Valuation we have made a request for relaxation in respect of a few items which are subject to repeated malpractices. as indeed the Secretariat. A number of Member countries. Questions have been raised about the registration of importers. ofcourse.

The National Tariff Commission Act is being amended. 23. Regarding regulatory duties I must confess we have. anti-dumping and countervailing are in conformity with provisions of WTO. For the remaining items. 20 and 30 percent). This would necessitate an adjustment in the current four duty rate slabs (5. our maximum tariff rate (barring certain exceptions like automobiles and alcoholic beverages) is to be capped at 25%. 10. 22. used these as surrogate anti-dumping levies as we did not have a working anti-dumping law. we propose to take corrective measures at the time of the budget. when we will see the desirability or otherwise of having zero as one of the four duty slabs. These duties can now be applied only on the recommendations of the National Tariff Commission that under its Act is obliged to follow the prescribed procedures and have open hearings where all interested parties are present. now the Customs Act has been amended to take away the powers from the CBR to impose regulatory duties. The four new slabs shall be announced in the forthcoming budget. We have already submitted that we are rapidly dismantling the entire exemptions regime and the remnants are expected to disappear sooner rather than later.8 years ahead of schedule. 21. in the past. As already announced. Legislation has been drafted. Its principal function now will be to handle the trade remedy laws. However. . The laws that we are introducing on safeguards.

In our Report we have particularly stressed the roll back of subsidies on exports. Export Measures 26. that duty drawback rates have been rationalized on an input- . There is no import licensing requirement in Pakistan and it appears to us that it is being confused with compliance of certain health. There are stringent tendering requirements and there are proper committees for bid evaluation and contract awards. The procedures are well known and documented in the Government procurement manuals. safety and other requirements. we have done away with price preferences that the public sector agencies could provide for domestically produced goods.9 24. The same applies equally to standards. technical requirements and SPS. allegation if you will. Almost all of our standards are identical or similar to the international ones and are certainly non discriminatory and in our view reasonably transparent. of import licensing. Government Procurement 25. We think we can clarify the position. Recently. This is one of the subjects that we propose to discuss in detail with the Secretariat. Pakistan is not a signatory to the Agreement on Government procurement but by no stretch of imagination does it mean that we do not subscribe to the principle of fair competition and transparency. We reiterate that there is no subsidy on export finance. We are a little disturbed on the issue.

10 output co-efficient basis for which a professional body has been set up. integration and greater expertise. Our objective. trademarks. We have no doubt that proper enforcement of intellectual property rights is in Pakistan’s own interest in view of the obvious implications for investment and creativity in Pakistan. which is a well accepted principle and duly recognized by the relevant WTO Agreements. As stated in our report. TRIMS & TRIPS 27. We are very conscious of our Intellectual Property Rights obligations. 28. we have amended the laws on copyrights. . The plant breeders rights legislation is at an advanced stage. We realise. we have accepted the decision of the CTG of November. Exports are of-course ‘zero rated’. we propose to set up the Pakistan Intellectual Property Rights Organization that would bring under one umbrella the various agencies dealing with intellectual property rights. is to ensure better enforcement. On TRIMS. of-course. our capacity weaknesses but are determined to correct these in the shortest possible time. and that there are no freight subsidies or compensatory rebates. 2001 and are not sure what kind of clarifications and assurances are being sought. quite simply. patents and industrial design and integrated circuits to make them WTO compliant. To provide for greatest synergy.

A number of questions have been put on the services sector. The Trading Corporation of Pakistan has an almost insignificant role in the export of rice and cotton – its involvement is largely there where the buyer wishes to deal with a public sector agency. Creation of regulatory authorities. the intensity and speed of reforms in these sectors has left us somewhat breathless. We expect positive results as by making the trade regime more predictable private sector investments and marketing efforts will be strongly encouraged. There is no state monopoly of trade in Agricultural goods. In my submission on 23rd of January I had the opportunity to dilate upon the agricultural sector reforms programme.11 Sectoral Policies 29. These reforms will particularly focus on market driven policies. 31. and pro-poor targeting of subsidies. particularly in Banking. Chairman. curtailment of role of public sector. 30. Telecommunications and Insurance.. promulgation of new laws. a veritable army of consultants .…. On export subsidies we will ofcourse remain within the ambit of the Agreement on Agriculture. privatisation activities.. To be quite candid. all . Mr. 32. As already reported a major initiative taken by us is to allow intra-trade of agricultural products regardless of the domestic shortage or surplus position.

Mr. once again. I hope through this statement. done enough in terms of liberalisation? • Are these liberalisation efforts sustainable? . we have satisfactorily addressed their concerns and provided the necessary clarifications. 34. Mr. we have taken good note of the issues raised here and the suggestions made. Chairman. Allow me to thank. 33. as also our answers to the written questions. given its present economic levels.12 this is bringing about rapid changes that are testing our administrative and managerial capabilities to the hilt. But before I part company let us pause for a moment and put two question to ourselves. Chairman. • Has Pakistan. 35. We will take a fresh look at our commitments under GATS and try to be as liberal as our circumstances would warrant. It has been a rewarding experience for our delegation to have participated in this Review. However. all the Members who have taken the trouble to study our Trade Policy.

in the automotive sector. • Second. including the dismantling of tariff walls.13 36. market access is constrained by the proliferation of regional and other preferential trading arrangements. for a variety of political and economic factors. and importers. including export subsidies. until such time as our export diversification efforts bear fruit our comparative and competitive advantages are only in textiles and agriculture. our trade liberalisation is beginning to erode our domestic capacities – in chemicals. • Fourth. tariff peaks and subsidies – in our major markets. resort to unfair trade practices. there has been a decline in domestic and foreign direct investment. . anti-dumping measures. • Third. In both these product groups we face strong barriers – quota. I am tempted to share with you the kind of thoughts that fail to escape us : • First. in engineering and electronic goods. While I will encourage every member here to objectively evaluate these questions. The situation is of-course exacerbated where some of the suppliers.

in the ultimate analysis. that this TPR will recognise Pakistan’s endeavours as well as its limitations and induce. and I feel reassured by the encouraging remarks that I have heard in this room. . etc. Chairman. 37. to support Pakistan’s trade and investment environment in a major way.T. Our economic revival programme will succeed only if we manage to attract sufficiently large investments. Pakistan’s economic success. I. It is our sanguine hope. 38.14 Mr. particularly in sectors where we have a comparative advantage – Textiles Agriculture and its derivatives. will rely crucially on a major export expansion. particularly our major trading partners.

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